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ISCR Case 10-01219.h1 — CASE

ISCR Case 10-01219.h1denied

Case Headnote

ISCR Case No. 10-01219.h1

deniedAug 29, 2011· Hon. Nichole L. Noel· hearing

Summary

A 50-year-old government contractor employee was denied a security clearance under Guideline F (Financial Considerations) due to $52,000 in delinquent debt accumulated between 2006 and 2010. The debt primarily stemmed from providing financial support, including rent and other expenses, to a woman and her four children. The applicant's financial problems became acute in 2009 when his income decreased due to a lack of overtime, making it difficult to pay bills and leading to mortgage delinquency.

In July 2011, the applicant filed for Chapter 7 bankruptcy protection, which included the alleged debts. However, the applicant failed to demonstrate a record of financial reform or rehabilitation following the bankruptcy filing. Financial counseling was only undertaken as a prerequisite for the bankruptcy petition, and no further efforts to address financial issues or evidence of reformed financial habits were provided.

The decision highlighted that the financial problems were recent, did not occur under unusual circumstances, and were a consequence of the applicant's decision to provide support. The applicant relied on bankruptcy as a method of resolving delinquent debt without demonstrating further efforts to address his financial issues, leading to the denial of his security clearance.

Why the Applicant Was Denied

The applicant accumulated $52,000 in delinquent debt due to financial support for a woman and her children.
The applicant did not demonstrate a record of financial reform or rehabilitation after filing for bankruptcy.

Conditions Referenced

Disqualifying

AG ¶ 19(a)raisedInability or Unwillingness to Satisfy Debts
AG ¶ 19(c)raisedA History of Not Meeting Financial Obligations

Key Rule Quoted

“The protection of the national security is the paramount consideration.”

Procedural Posture

SOR issuedJan 28, 2011
Answer filed—
Hearing heldJul 12, 2011
Decision dateAug 29, 2011

Cite For

Financial Irresponsibility Leading to Security Clearance Denial Under Guideline F
Lack of Demonstrated Financial Reform Post-bankruptcy
Impact of Personal Relationships on Financial Obligations and Security Clearance Eligibility

Editorial summary generated for research. Not legal advice; not a prediction. Verify against the full decision before relying on any quoted language.

Standardized Decision Profile

SEAD-4 Guideline F · descriptive summary of a decided case

Posture: Decision on RecordDecided: denied

The judge found that the applicant accumulated $52,000 in delinquent debt and filed for Chapter 7 bankruptcy protection. However, the applicant did not demonstrate financial reform or rehabilitation, leading to a denial of the security clearance.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	Applicant is indebted to ten creditors for approximately $52,000 in delinquent debt. $52,000	Against Applicant	Unspecified Financial	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.b	Applicant filed for Chapter 7 bankruptcy protection in July 2011.	Against Applicant	Unspecified Financial	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.c	Applicant provided financial support to a woman and her four children, which contributed to his financial problems.	Against Applicant	Unspecified Financial	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.d	Applicant's financial problems became acute in 2009 as he continued to provide financial support despite a decrease in income.	Against Applicant	Unspecified Financial	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.e	Applicant's income decreased due to lack of overtime, leading to difficulty in paying bills and delinquency on his mortgage.	Against Applicant	Unspecified Financial	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.f	Applicant's financial support for the woman and her children included paying rent and other expenses, which he could not sustain.	Against Applicant	Unspecified Financial	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.g	Applicant's financial problems are the consequences of his decision to provide support to the woman and her children.	Against Applicant	Unspecified Financial	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.h	Applicant did not demonstrate a record of financial reform and rehabilitation after filing for bankruptcy.	Against Applicant	Unspecified Financial	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.i	Applicant received financial counseling only as a prerequisite for filing his bankruptcy petition.	Against Applicant	Unspecified Financial	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.j	Applicant's debts alleged in the SOR are included in the bankruptcy petition, which is pending.	Against Applicant	Unspecified Financial	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.k	Applicant's financial problems are recent and did not occur under unusual circumstances.	Against Applicant	Unspecified Financial	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.l	Applicant did not provide evidence of reformed financial habits.	Against Applicant	Unspecified Financial	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.m	Applicant relied on bankruptcy as a method of resolving delinquent debt without demonstrating further efforts to address his financial issues.	Against Applicant	Unspecified Financial	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—

Descriptive standardized rendering of a decided public case (Guideline F). The verbatim source decision is shown in full below.

Full decision

The complete, official text — footnotes and signatures included — is in the original PDF.

Decision text, by section

DEFENSE OFFICE OF HEARINGS AND APPEALS

HEARING

APPEARANCES

DEPARTMENT OF DEFENSE DEFENSE OFFICE OF HEARINGS AND APPEALS

In the matter of: ) ) ) ISCR Case No. 10-01219 ) Applicant for Security Clearance )

For Government: Eric Borgstrom, Esq., Department Counsel For Applicant: Pro se

August 29, 2011 ______________

STATEMENT OF CASE

______________

NOEL, Nichole L., Administrative Judge:

Applicant contests the Defense Department’s intent to revoke his eligibility for a security clearance to work in the defense industry. The evidence shows that between fall 2006 and fall 2010, Applicant accumulated $52,000 in delinquent debt. He filed for Chapter 7 bankruptcy protection in July 2011. Although bankruptcy is a legitimate method of resolving delinquent debt, Applicant has not demonstrated a record of financial reform and rehabilitation. Accordingly, clearance is denied.

Statement of the Case

Acting under the relevant Executive Order (EO) and DoD Directive,1 on January 28, 2011, the Defense Office of Hearings and Appeals (the Agency) issued a Statement of Reasons (SOR) explaining that it was not clearly consistent with the national interest to continue Applicant’s access to classified information. The SOR detailed the factual basis for the action under the security guideline known as Guideline F (Financial Considerations).

Applicant answered the SOR and requested a hearing. The case was assigned to another administrative judge in April 2011. The case was assigned to me on June 3, 2011. The hearing proceeded as scheduled on July 12, 2011. Department Counsel offered Government’s Exhibits (GE) 1 through 6, which were admitted without objection. Applicant’s Exhibits (AE) A through I were also admitted without objection. I received the transcript (Tr.) on July 21, 2011.

FINDINGS OF FACT

Applicant is a 50-year-old employee of a government contractor. He has worked for the same company for 30 years and has held a security clearance for the majority of that time. His most recent periodic reinvestigation revealed, and he admits as alleged in the SOR, that he is indebted to ten creditors for approximately $52,000 in delinquent debt.2

Applicant has never married and has no children. In late 2006, he became friendly with a single mother who lived on his street. When they met, the woman had three children between the ages of 6 and 12. Soon, Applicant became emotionally attached to them. Because he believed he was in a romantic relationship with the woman, he began to provide financial support to the woman and her children. Initially, he gave the woman some money to help her pay her bills. Initially, he was able to do so without any detriment to his personal finances because he earned overtime pay on a regular basis.3

In 2008, the woman had a fourth child, Applicant was not the father. Still, he continued to financially support the woman and her four children. By 2009, he was giving her in excess of $3,000 each month. He paid her rent; he bought clothes and electronics for the children, which the family often sold for cash. He paid $2,000 to bail the woman out of jail and allowed her and the children to live in his home while she served a sentence on home confinement. To provide this level of support, not only did Applicant give the woman his entire paycheck, he also took cash advances on his credit card. As his financial support for the woman and her family increased, his income steadily decreased due to lack of overtime. By 2009, Applicant’s income decreased so drastically that he began having difficulty paying his bills and his mortgage became delinquent.4

In October 2010, Applicant was paying the rent for the apartment the woman lived in with the children. Through neighborhood gossip, he learned that another man was living in the apartment. After he confirmed this to be true, Applicant stopped providing financial support to the woman. However, by that time his finances were in disarray. Applicant refocused his attention on resolving his delinquent debt.5

He rehabilitated his mortgage loan through a loan modification program. Unable to negotiate settlement agreements with his creditors, Applicant decided to file for bankruptcy protection. Although he initially planned to file under Chapter 13, his lawyer advised him that Chapter 7 would be the better option. He filed his bankruptcy petition on July 11, 2011, the day before the hearing. All of the debts alleged in the SOR are included in the bankruptcy petition, which is now pending with the bankruptcy court.6

POLICIES

When evaluating an applicant’s suitability for a security clearance, the administrative judge must consider the adjudicative guidelines. In addition to brief introductory explanations for each guideline, the adjudicative guidelines list potentially disqualifying conditions and mitigating conditions, which are to be used in evaluating an applicant’s eligibility for access to classified information.

These guidelines are not inflexible rules of law. Instead, recognizing the complexities of human behavior, administrative judges apply the guidelines in conjunction with the factors listed in the adjudicative process. The administrative judge’s overarching adjudicative goal is a fair, impartial, and commonsense decision. According to AG ¶ 2(c), the entire process is a conscientious scrutiny of a number of variables known as the “whole-person concept.” The administrative judge must consider all available, reliable information about the person, past and present, favorable and unfavorable, in making a decision.

The protection of the national security is the paramount consideration. AG ¶ 2(b) requires that “[a]ny doubt concerning personnel being considered for access to classified information will be resolved in favor of national security.” In reaching this decision, I have drawn only those conclusions that are reasonable, logical, and based on the evidence contained in the record.

Under Directive ¶ E3.1.14, the Government must present evidence to establish controverted facts alleged in the SOR. Under Directive ¶ E3.1.15, the applicant is responsible for presenting “witnesses and other evidence to rebut, explain, extenuate, or mitigate facts admitted by the applicant or proven by Department Counsel.” The applicant has the ultimate burden of persuasion to obtain a favorable security decision.

A person who seeks access to classified information enters into a fiduciary relationship with the Government predicated upon trust and confidence. This relationship transcends normal duty hours and endures throughout off-duty hours. The Government reposes a high degree of trust and confidence in individuals to whom it grants access to classified information. Decisions include, by necessity, consideration of the possible risk the applicant may deliberately or inadvertently fail to safeguard classified information. Such decisions entail a certain degree of legally permissible extrapolation of potential, rather than actual, risk of compromise of classified information.

Section 7 of EO 10865 provides that adverse decisions shall be “in terms of the national interest and shall in no sense be a determination as to the loyalty of the applicant concerned.” See also EO 12968, Section 3.1(b) (listing multiple prerequisites for access to classified or sensitive information).

ANALYSIS

Guideline F, Financial Considerations

The security concern for Financial Considerations is set out in AG ¶ 18:

Failure or inability to live within one’s means, satisfy debts, and meet financial obligations may indicate poor self-control, lack of judgment, or unwillingness to abide by rules and regulations, all of which can raise questions about an individual’s reliability, trustworthiness and ability to protect classified information. An individual who is financially overextended is at risk of having to engage in illegal acts to generate funds.

The guideline notes several conditions that could raise security concerns under AG ¶ 19. Two are potentially applicable in this case:

(a) inability or unwillingness to satisfy debts; and

Applicant’s financial problems became acute in 2009 as he continued provide financial support for the family of his love interest despite his steady decrease in income. As a result, he began to accumulate debt that he could not repay. These facts support the application of the disqualifying conditions cited above.

The woman took advantage of Applicant’s kindness. However, he willfully ignored the red flags that were raised repeatedly during their four-year interaction and continued to provide financial support for the woman and her four children. The financial problems he now faces are the consequences of that decision. Therefore, none of the mitigating conditions potentially available under AG ¶ 207 apply to this case.

Because Applicant’s financial problems are recent and did not occur under unusual circumstances, AG ¶ 20(a) does not apply. Although Applicant could not control the decrease in overtime hours available at his company, he did have control over how he spent his decreasing income. He chose to provide financial support to his love interest and her four children, to his detriment. Accordingly, AG ¶ 20(b) does not apply. Applicant did not provide any evidence that he has reformed his financial habits. Although he has received financial counseling, he only did so as a prerequisite for filing his bankruptcy petition. Consequently, AG ¶ 20(c) is not applicable. He has filed for Chapter 7 bankruptcy protection to resolve his delinquent debt. While bankruptcy is a legitimate method of resolving delinquent debt, an applicant must do more than merely show that he or she relied on a legally available option (such as bankruptcy) in order to claim the benefit of AG ¶ 20(d).8

To conclude, the evidence as a whole justifies current doubts about Applicant’s judgment, reliability, and trustworthiness. Following Egan9 and the clearly-consistent standard, I resolve these doubts in favor of protecting national security. In reaching this conclusion, I gave due consideration to the whole-person concept. Nevertheless, Applicant did not meet his ultimate burden of persuasion to obtain a favorable clearance decision. This case is decided against Applicant.

7 20(a) The behavior happened so long ago, was so infrequent, or occurred under such circumstances

FORMAL FINDINGS

Formal findings for or against Applicant on the allegations set forth in the SOR, as required by section E3.1.25 of Enclosure 3 of the Directive, are:

Paragraph 1, Guideline F: AGAINST APPLICANT

Subparagraphs 1.a - 1.m: Against Applicant

CONCLUSION

In light of all of the circumstances presented by the record in this case, it is not clearly consistent with the national interest to grant Applicant a security clearance. Eligibility for access to classified information is denied.

________________________ Nichole L. Noel Administrative Judge

FOOTNOTES

1 This case is adjudicated under Executive Order 10865, Safeguarding Classified Information within Industry, signed by President Eisenhower on February 20, 1960, as amended, as well as DoD Directive 5220.6, Defense Industrial Personnel Security Clearance Review Program, dated January 2, 1992, as amended (Directive). In addition, the Adjudicative Guidelines for Determining Eligibility for Access to Classified Information (AG), effective within the Defense Department on September 1, 2006, apply to this case. The AG were published in the Federal Register and codified in 32 C.F.R. § 154, Appendix H (2006). The AG replace the guidelines contained in Enclosure 2 to the Directive. 2 Tr. 16-17; Security Clearance Application, dated September 21, 2009. 3 Tr. 16, 20-21, 24-26. 4 Tr. 21, 27-29, 31-34. 5 Tr. 20, 29-30. 6 AE C – G; Tr. 34-37. that it is unlikely to recur and does not cast doubt on the individual’s current reliability, trustworthiness, or good judgment; 20(b) The conditions that resulted in the financial problem were largely beyond the person’s control (e.g., loss of employment, a business downturn, unexpected medical emergency, or a death, divorce or separation), and the individual acted responsibly under the circumstances; 20(c) The person has received or is receiving counseling for the problem and/or there are clear indications that the problem is being resolved or is under control; 20(d) The individual initiated a good-faith effort to repay overdue creditors or otherwise resolve debts; 20(e) The individual has a reasonable basis to dispute the legitimacy of the past-due debt which is the cause of the problem and provides documented proof to substantiate the basis of the dispute or provides evidence of actions to resolve the issue; and 20(f) The affluence resulted from a legal source of income. 8 ISCR Case No. 02-30304 at 3 (App. Bd. Apr. 20, 2004) (citations omitted). 9 Navy v. Egan, 484 U.S. 518 (1988).